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YouTube enters the subscription game with Red, but can it compete in original content?

With many Americans devoting endless hours of time to television watching each week it remains one of the most popular leisure activities; however, consumers are leveraging a variety of platforms to satisfy their hunger for content. According to Mintel’s Leisure Time US 2015 report, nearly half of US online adults subscribe to cable or satellite TV, while 45% subscribe to Netflix, another 23% subscribe to Amazon Instant Video and 16% to Hulu Plus. With so many options available in the home and on-the-go, time spent watching video programming is unlikely to decline in the near future, especially with three-quarters of consumers reporting that they have watched online video in the past three months. Though a little late to the party, YouTube is also looking to get in on the action with its launch of YouTube Red, a subscription based platform that offers ad-free video content.

Per the Mintel TrendExtend My Brand, brands are learning to leverage their equity; with YouTube Red the brand is leveraging not only its name but also its well-established customer loyalty to create an offshoot with a different business model. Beyond traditional YouTube content (ie, short-form user-generated videos) the new subscription platform will also feature original series and movies starting in 2016. The original programming will be developed by YouTube stars such as PewDiePie (the top-earning YouTube star in 2015 as ranked by Forbes), Rooster Teeth, CollegeHumor, and Joey Graceffa. To further entice subscribers, YouTube Red members will also have access to the associated gaming app and forthcoming YouTube Music app, which will be interchangeable with a Google Play Music subscription.

YouTube is the largest internet video site in the world, and the birthplace of the viral video concept. Evolving from a site where people share home videos with friends to a community of content creators that garner millions of fans (and dollars) for their videos, YouTube Red will attempt to capitalize on its biggest stars to draw-in a paying audience. In contrast to Netflix, Hulu and Amazon, YouTube already has a bevy of content providers to work with. Creating exclusive deals with these YouTubers can differentiate the YouTube Red platform from other long-form video content providers.

Can YouTube Red succeed?

Thus far, it appears that consumers’ thirst for video content is unquenchable, and according to Mintel’s 2016 North America Consumer Trends prediction Balance or Bust, the multitude of products and services available to consumers leaves them wanting it all, and binge watching has become commonplace. The sheer number of original shows available on traditional and non-traditional TV platforms challenges all but the most dedicated couch potatoes to keep up. Although YouTube is a little late to the game with a subscription service model, they have a leg-up on the competition with their ability to appeal to young, internet savvy consumers. In fact, Mintel research indicates that three in five Millennials and iGens are not currently subscribed to pay TV.

According to a survey conducted by Variety in July 2014, the five most influential media stars for Americans aged 13-18 are all YouTube sensations. YouTube stars such as Smosh, The Fine Bros, and PewDiePie all ranked higher than multi-million dollar, global celebrities such as Katy Perry and Johnny Depp. This is despite the fact that YouTube stars are, for the most part, outside of the mainstream media and are not leveraging the Hollywood press machine that keeps celebrities’ careers moving forward.

YouTube’s relationships with these content creators are exceptionally valuable as original programming from these stars may be the most attractive part of its subscription service. Additionally, partnerships with YouTube will be lucrative for content creators, encouraging video developers to continue to share their work on the site, creating an never-ending supply of potential talent for YouTube Red.

The question that remains unanswered is whether or not YouTube’s prime audience (or their parents) is willing to pay for this service, or would rather subsist on the millions of videos that live outside of the paywall.

Dana Macke is a Lifestyle & Leisure Analyst at Mintel. Dana incorporates her background in strategic marketing to deliver actionable insights on a wide range of lifestyle and leisure topics.

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